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Decrease in patent litigation questions need for patent reform

Lex Machina recently released its second annual Patent Litigation Year in Review report, which provides some interesting insight into the major patent litigation trends of 2014. The report paints a picture for patent litigation that seems quite different than the narrative you typically hear in the popular press. According to Lex Machina data there has been a dramatic decrease in patent litigation.

The topic of patent reform has once again taken center stage in Washington, DC, with several large tech companies continuing to push for additional reforms. These tech companies claim that the reforms are necessary in order to combat run away patent litigation. But that is not what Lex Machina’s data shows. In fact, in 2014 there were 1,070 fewer patent lawsuits filed than during 2013. Furthermore, the number of patent cases filed in 2014 was lower than the number of cases filed in 2012 by some 433 cases. Therefore, the stories of continued run away litigation seem to be greatly exaggerated.

When looking at this chart it is wise to keep in mind that President Obama signed the America Invents Act (AIA) into law on September 16, 2011. The AIA included several litigation relevant provisions. First, the AIA created the new and extremely popular Inter partes review procedure, which gives defendants the ability to challenge patents at the United States Patent and Trademark Office (USPTO) in a streamlined, challenger friendly process. The entire purpose of IPR and the other post grant proceedings was to alleviate the burden on district courts and to give challengers a faster, cheaper way to challenge specious patents. Given the extreme popularity of IPR and the fact that we are witnessing a steep decline in patent litigation it would seem that there is reason to believe IPR is working as intended.

Second, and perhaps most importantly, the AIA introduced new joinder provisions that would make it more difficult, if not impossible, for patent owners to sue large numbers of defendants in a single litigation. Prior to the enactment of the AIA dozens or hundreds of defendants were sued in a single case. This unfairly compromised their right to mount an individual defense. Of particular interest, the joinder rules were not intended to prevent patent litigation, just make it fairer for defendants so that they would not be bundled together in cases where there really was no commonality of facts aside from the patent being asserted.

Although Congress may have naively thought otherwise, no one familiar with the industry suspected that the implementation of joinder provisions in the AIA would mean patent plaintiffs would give up suing, or that patent plaintiffs would sue fewer defendants. Yes, patent plaintiffs cannot sue as many defendants per case, so that necessarily meant that they would bring a greater number of patent lawsuits, which they did initially during 2012 and 2013. That there is such a dramatic decrease in patent lawsuit filings in 2014 suggests that the initial surge in the number of patent lawsuits filed in response to the joinder provisions has slowed, likely in response to Inter Parte review and the fact that the Patent Trial and Appeal Board (PTAB) has been working as intended, as a filter to weed out cases.

Given the dramatic decrease in patent litigation it seems entirely premature for Congress to be considering additional patent reform at this early stage. The AIA is barely 3.5 years old, post grant challenges such as IPRs have only been available for barely 2.5 years, and the most significant changes to substantive patent law are barely 2 years old. Now that we have evidence that the so-called patent litigation explosion (which was of course intended by the AIA) has been curbed the prudent thing to do would be to wait and see what, if any, additional laws are necessary. The significant changes to both substantive and procedural patent law brought about by recent Supreme Court decisions on patent eligibility and the availability of attorneys’ fees further mandates caution.

Other highlights from Lex Machina’s 2014 Patent Litigation Year in Review include:

Filing Trends: Although the Eastern District of Texas and the District of Delaware remain the most popular courts for new patent cases, both saw a net decrease from last year – a 4.9% drop for Eastern Texas and a whopping 41.2% decline in Delaware.

Case Timing: Both the Central and Northern Districts of California saw faster median times to claim construction (about a year) than the Eastern District of Texas, the District of Delaware, or the national average (all a year and a half).

Motion Metrics: Of transfer motions decided in 2014, the Eastern District of Texas and the Northern District of California both saw near parity in their grant/deny rates, while Delaware and the Central District of California both exhibited a higher motion rate.

ANDA Cases and Design Patent Cases: Neither kind of case has been affected by the general downturn in new patent case filings.

Judges: Judge Gilstrap (E.D.Tex.) had 982 new cases in 2014, the most of any district court judge. Judges Sue Robinson (D. Del.), Leonard Davis (E.D.Tex.) and Richard Andrews (D.Del.) led in dispositive summary judgments.

Law Firms: Fish & Richardson led nationally by open cases, while Morris, Nichols, Arsht & Tunnell in Delaware and the Tadlock firm in Texas led in their respective districts.

Parties: A large number of cases by eDekka and Olivistar placed them at the top of the plaintiffs list; Apple remained the top defendant.

Damages: Damages awarded in 2014 included approximately $1.8 billion total in compensatory damages, with another $313 million total in enhanced damages. Eastern Texas tended to award more damages than other districts, regardless of whether measured by ratio of damages awarded to cases filed, or simply by median damages.

PTAB and ITC: PTAB cases were on the rise and ITC activity remained steady since its peak years in 2010-2011.

The Author

Gene Quinn
is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. Gene is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 8 Comments comments.

Pro SeMarch 30, 2015 6:07 pm

The IPR is in full effect… I have heard “you may lose your asset” and “have you seen the success rate on these proceedings?”

Rule of thumb: if you want to enforce patents today, you must also be ready to defend against the IPR and trust me, IPR qualified counsel co$t.

And understand: if you go after the big Silicon Valley companies, they start with a $300,000 defense budget per lawsuit.. so even if a patent holder ask for $5000 settlement, they are going to invest the $50,000 for an IPR because they want to keep setting examples to entities that dare to sue them.

An IPR defense requires a significant amount of resources that most lawyers are not going to cover on contingency.. unless you can find a firm that seriously believes in your IP but “good” IP after Alice raises more careful analysis.

I personally believe anyone still building their own product, though not disclosing it to meet AIA, and filing patents still is the most solid IP strategy.

If your IP is good enough, someone somewhere will believe enough to support enforcement and even IPR (I have a great team that fully supports).

Just my thought Gene.

angry dudeMarch 30, 2015 9:05 pm

2 Pro Se:

“someone somewhere will believe enough…”

Sounds like a great strategy 🙂

Now back to real world:

IPR or not, patent system is ****ed right now.

The ONLY strategy is to keep your invention a trade secret (if you can) and file some bs patent applications with non-publications requests and with some bs over-broad independent claims to make it non-allowable, then fight it for 10 years with PTO (much cheaper then IPR) while putting patent pending sticker on your products… before finally dropping your patent application …
without disclosing any important details about your invention…

Sounds like real strategy to you ?

BennyMarch 31, 2015 7:16 am

“These tech companies claim that the reforms are necessary in order to combat run away patent litigation”

The graph shows about 5000 cases of patent litigation in 2014. Pro Se, in his comment, quotes 300K per lawsuit. Taking half that amount, I calculate 750M$ p.a in litigation costs, possibly over 1B$. Slightly more than I usually spend on my wifes’ birthday presents. Looking into reform to reduce this sum – overall a loss to manufacturing business – might not be a pointless exercise.

Gene QuinnMarch 31, 2015 8:42 am

The analysis of costs seems rather out of proportion.

Even a modest IPR is going to cost $300,000 in legal fees, perhaps as high as $1 million depending upon what firm the challenger hires.

The vast majority of patent cases settle, many settle very early on in the process before the court is ever involved, which means they settle or somehow go away even before a scheduling conference. So yes, defending a patent lawsuit can be very expensive if you go all the way through discover and to a trial, but well less than 5% of cases go that far.

I do still believe that filing a patent application is the best strategy in many, if not most, cases. I think it probably makes sense to consider waiving publication though in a lot of circumstances so that the innovation can remain a secret unless a patent issues. To do that you need to waive foreign filing rights, but if you are not considering getting a foreign patent portfolio the benefit is clear.

-Gene

Pro SeMarch 31, 2015 9:29 am

*the $50,000 written about in my post about the IPR is just the cost for the “initial filing” document by the defendant whereas the patent owner is forced to find resources on equal level to defend against…

AnonMarch 31, 2015 9:32 am

Benny,

You seem too eager to fall to the common fallacy that there should be no cost to enforcing one’s patent rights.

You simply cannot take enforcement costs as a penalty to the rest of business as you seem to want to do.

BennyMarch 31, 2015 10:45 am

Anon,
At 300K a pop you have to do a cost/benefit analysis. It’s just not worth the effort if you are going to recoup 250K in lost profits, is it ? And yes, it is a penalty to the business. How else would I define it? Not an asset, surely.

AnonMarch 31, 2015 1:14 pm

Enforcing patent rights is not a penalty – not all costs are penalties.

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